The liquidity position is monitored carefully by 'cash budgeting' and any cash requirements are planned for as far as possible. However, a number of factors may be monitored which can indicate potential liquidity problems.

Apart from unusual major cash payments that have to be specifically budgeted for (i.e. tax or dividend payments, or major investments) the liquidity position is determined by the management of working capital items and the overall need for working capital. Working capital requirements will tend to increase as a company grows in size and makes a larger volume of sales. An increased value of sales turnover will tend to result in a greater value of sales remaining unpaid at any one time (i.e. more debtors), more stocks of raw materials, work in progress, and finished goods to support the increased volume of activity (although Just-In-Time approaches are changing the relationship between throughput and inventory holdings).